Importance of Brand Management in Global Recession and Budget Hotels - Essay Example

?Critically evaluate the extent to which budget hotel brands require effective brand management in the current post recession environment. (Budget Hotel Brands) Table of Contents Critically evaluate the extent to which budget hotel brands require effective brand management in the current post recession environment. (Budget Hotel Brands) 1 Table of Contents 2 Introduction 3 Importance of Brand Management 3 Global Recession and Budget Hotels 4 Strategies for Budget Hotels 5 References 7 Introduction The initiation of branding could be traced back to 200 BC when the world’s first brand was born. It was during this period that a sandal maker based in Syria mentioned his name on the footwear he was selling so as to keep it distinct from others. During initial years branding was often viewed as naming a good or an article. This follows from the different religious views which stress on naming individuals so as to distinguish them from the rest of the others. The aspect of naming goods has over the years modified itself to what is termed as ‘branding’ in today’s globalised market environment (Jackson & Fulberg, p.51). According to Keller a brand is defined as “a set of mental associations held by the consumer, which ad to the perceived value of a product or service” (Kapferer, p.10). The importance of brands could be analysed from the fact that well known brands like Coca Cola, Kellogg’s and Apple are being valued in billions just because of the power of their names (or brands). The present study would focus on the importance of branding and brand image in case of budget hotels especially in the light of the recent financial meltdown and the competitive forces prevalent in the market. Importance of Brand Management The present age of business is being widely debated as the age of consumerism. In this age customers are in the driver’s seat as firms are trying to aggressively woo customers by offering them greater value for every purchase. The competitive environment in the consumer markets has forced organizations to distinguish their product and service offering from the rest of its competitors (Budzinski, p.13). Branding has therefore assumed considerable importance for business organizations as it is being largely used by the customers to distinguish the product and service offering among the wide array of choices available in the market. The importance of branding could be analysed from the fact that branding plays a key role in the positioning of a firm’s product or service in the minds of the consumer. This is important considering the fact that positioning plays a key role in the consumer’s buying behaviour process. Branding assumes significant importance as it distinguishes the product or service offering of different organizations and also gives uniqueness to a particular product or service in the consumer markets. In the present age it has often been argued that consumers are more intended towards purchasing a brand instead of a product. Branding also has a role in the aspect of marketing communication as they are essentially used by firms to promote their product in the market. For example Cadbury uses its famous tagline “I love Cadbury” to make a connection with its target market audience (Elliot & Percy, p.229-230). Brand equity is a broad term and includes four critical aspects namely awareness of a brand, loyalty towards a brand, quality and image. The combined effect of these four aspects plays a critical role in determining the profitability and sustainability of a brand in the market. For example the success story of the fast service chain of restaurants could be traced to the effectiveness by which the marketer has handled these four underlying aspects of brand equity to build a formidable brand image (Oh & Pizam, p.103-104). Global Recession and Budget Hotels The global recession had large scale impacts on the business prospects of budget hotels. The financial meltdown resulted in rise of unemployment coupled with decrease in the income levels of the individuals. It also led to drying up of the credit markets which made it difficult for budget hotels to get access to finance for maintaining growth. The aspect of credit availability assumes widespread importance for budget hotels since they do not have huge reserves of cash available to self finance their expansion plans. According to a research conducted by Delloite the customer’s demand for hotels dipped four times than its normal levels. Hotels reported revenue loss of approximately 17 percent in the year 2010. However, the year 2011 is expected to show recovery paths for the hospitality industry (Delloite, p.51). Figure 1: GDP versus Demand (Source: Delloite, p.51) Budget hotels based in Europe in particular witnessed a slump of 5 to 10 percent in their revenue margins during the period of economic recession. The price sensitive nature of consumers during the period of recession has led to a good sign for budget hotels as they are being preferred over luxury hotels especially in the context of business class travellers (Blanco, Oehmichen & Frood, p.2-3). Strategies for Budget Hotels Traditionally budget hotels have been positioned as hotels that offer only the basic amenities at a very low price. However with the advent of designer budget hotels like Holiday Inn, Yotel etc the positioning of the budget hotels has largely changed (Blanco, Oehmichen & Frood, p.2-3). This has accentuated the need for the presence of an effective branding strategy for the budget hotels to sustain itself in the market. Effective branding would include better design and ambience inside the hotels. Moreover with brands like Hilton making a foray into the budget hotels segment there is a strong need to ensure a proper branding strategy so as to remain in the market. In case of budget hotels a good brand image would require an effective strategy with regards to the aspect of people, process and physical evidence. An effective service mix would to only improve the positioning but would also improve the brand image of the budget hotel. Budget hotels must ensure proper training to its staff so that they offer an excellent service to the customers. This would enhance the customer value and would also ensure a favourable positioning for the firm. Budget hotels must also embrace effective technologies so that customers have a memorable stay at the hotel. Finally a good ambience and design could reap wonders for the budget hotels in a market environment where price is the most influential aspect in the decision making of the customer. References Blanco, A.C., Oehmichen, A., & Frood, S. Performance. 2010. Branded Budget Hotels in Europe: A Development Guide. March 10, 2011 < http://www.davislangdon.com/upload/StaticFiles/EME%20Publications/Market%20Reports/Branded%20Budget%20Hotels%20In%20Europe%20-%20A%20Development%20Guide.pdf>. Budzinski, O. The Internationalisation of Business Activity and Competitive Markets. The governance of global competition: competence allocation in international competition policy. Edward Elgar Publishing. 2008. Delloite. Legacy of Over Supply. 2010. Hospitality 2015 Game Changers or spectators. March 10, 2011 http://www.deloitte.com/assets/Dcom-Australia/Local%20Assets/Documents/Industries/Real%20Estate/Hospitality%202015/Deloitte_Hospitality2015_Global_Report.pdf>. Elliot, R. & Percy, L. Positioning brands in communication. Strategic brand management. Oxford University Press. 2007. Jackson, D.M. & Fulberg, P. A Historical perspective. Sonic branding: an introduction. Palgrave Macmillan. 2003. Kapferer, J.N. Customer –based Definitions. The new strategic brand management: creating and sustaining brand equity long term. Kogan Page Publishers. 2008 Oh, H. & Pizam, A. Brand Equity Research in Hospitality Industry. Handbook of Hospitality Marketing Management. Butterworth-Heinemann. 2008. Read More